Chapter Sources of Short-Term Financing

Size: px
Start display at page:

Download "Chapter Sources of Short-Term Financing"

Transcription

1 Chapter Sources of Short-Term Financing

2 Chapter 8 - Outline PPT 8-2 Sources of Short-Term Financing Trade Credit from Suppliers Net Credit Position Chartered Banks in Canada Types of Short-term Loans Interest Rate Terminology Corporate and Foreign Borrowing Accounts Receivable Financing Inventory Financing Summary and Conclusions

3 Sources of Short-Term Financing PPT 8-3 There are various sources of short-term funds available to a firm: Trade Credit from Suppliers Bank Loans Corporate Promissory Notes Bankers Acceptances Foreign Borrowing Loans Against Receivables and Inventory

4 Figure 8-1 Structure of corporate debt, 2000 PPT 8-4

5 Trade Credit from Suppliers PPT 8-5 The largest source of short-term financing for a firm-over 50% It is usually a day grace period before a bill is due A cash discount is often given if payment is made within a specified time Ex., 2/10 net 30 means a 2% discount is given if paid in 10 days; if not, the full amount is due in 30 days

6 Net Credit Position PPT 8-6 Net Credit Position: a firm s Accounts Receivable (A/R) minus its Accounts Payable (A/P) if A/R is greater than A/P, it is a net provider of trade credit (positive number) if A/P is greater than A/R, it is a net user of trade credit (negative number) larger firms tend to be net providers of trade credit, while smaller firms are net users

7 Types of Short-term Bank Loans PPT 8-8 Line of Credit: company is able to draw upon a yearly borrowing facility arranged in advance revolving credits are for periods longer than 1 year general purpose loans Transaction Loan: short-term loan for a specific purpose Compensating Balance: when a bank requires a minimum average account balance in order to qualify for a loan can be thought of as a form of collateral less common than in the past

8 Chartered Banks in Canada PPT

9 Compensating Balance: when a bank requires a minimum average account balance in order to qualify for a loan can be thought of as a form of collateral and compensate the bank for its service Compensating balances raise the cost of a loan, the borrower must borrow more than the amount needed Amount borrowed = amount needed/ (1-C) less common than in the past

10 PPT 8-9 Interest Rate Terminology Prime Rate: the interest rate charged to a bank s best customers acts as a benchmark for calculating other interest rates Effective Interest Rate: the actual interest rate or true cost of a loan, including interest on interest (compounding)

11 Figure 8-2 Prime interest rate movements PPT 8-10

12 PPT 8-11 Corporate and Foreign Borrowing Commercial Paper: a short-term unsecured promissory note in minimum units of $50,000 sold (at a discount) by finance companies, other large corporations cheaper than bank loans total amount of commercial paper outstanding has increased greatly in recent years Bankers Acceptances to finance goods in transit (particularly imports) sold at a discount Eurodollar Loans: loans from foreign banks are called Eurodollar loans (U.S Eurodollars predominate) foreign interest rates may be lower

13 PPT 8-12 Figure 8-3 Corporate short-term paper outstanding

14 Figure 8-4 Comparison of commercial paper rate to bank prime rate* PPT 8-13

15 Accounts Receivable Financing PPT 8-14 A/R financing includes 3 choices: pledging accounts receivable as collateral for a loan an outright sale (factoring) of receivables to a factoring company Asset-backed Securities: sale of receivables by large corporations in public offerings Tends to be a relatively expensive source of financing

16 Pledging accounts of receivable as collateral Convenient means of financing. Receivables levels are rising as the need for financing is increasing. Lender screens accounts and loans a percentage (60% - 75%) of the acceptable amount. Lender has full recourse against borrower. The interest rate, which is usually in excess of the prime rate, is based on the frequently changing loan balance outstanding.

17 Factoring Receivables Receivables are sold, usually without recourse, to a factoring firm. A factor provides a credit-screening function by accepting or rejecting accounts. Factoring costs. Commission of 1%-3% of factored invoices Interest on advances

18 Asset-backed public offerings Public offerings of securities backed by receivables as collateral is a recently employed means of short-term financing. These have included mortgages, car loans and credit car receivables. Credit ratings often are better than the issuing firm. Several problems must be resolved: Image: Historically, firms that sold receivables were considered to be in financial trouble. Computer upgrading to service securities. Probability of losses on default of underlying securities.

19 Inventory Financing LT 8-8 Inventory may be assigned as collateral security against an operating loan. The collateral value of inventory is based on several factors. Marketability Raw materials and finished goods are more marketable than goods-in-process inventories. Standardized products or widely traded commodities qualify for higher percentage loans. Price Stability Perishability Physical control

20 Inventory control method Blanket inventory liens: Lender has general claim against inventory of borrower. No physical control. Trust receipts: Also known as floor planning; the borrower holds specifically identified inventory and proceeds from sale in trust for the lender. Warehouse: Goods are physically identified, segregated, and stored under the director of an independent warehousing company. Inventory is released from warehouse openly upon presentation of the warehouse receipt controlled by the lender.

21 Longer-term Loans LT 8-9 Term Loan (Instalment Loan): loan for 1-7 years interest rate may be fixed or change with prime rate repaid in monthly or quarterly instalments used to buy capital assets (ex; automobiles, property)

22 Summary and Conclusions PPT 8-16 Short-term financing options include: trade credit from suppliers bank operating loans commercial paper for large companies Eurodollar or foreign currency loans financing secured by accounts receivable or inventory Bank operating loans move up or down based upon the borrower s need for working capital, and incur interest based upon the prime rate

Sources of Short-Term Financing C H A P T E R E I G H T

Sources of Short-Term Financing C H A P T E R E I G H T Sources of -Term Financing C H A P T E R E I G H T Figure 8-1 Structure of corporate debt, 1998 PPT 8-1 35% 30% 25% 20% 15% 10% 5% 0% Accounts payable Bank loans Other short term loans term paper Bonds

More information

Chapter16. Managing Short-Term Liabilities (Financing)

Chapter16. Managing Short-Term Liabilities (Financing) Chapter16 Managing Short-Term Liabilities (Financing) 1 Learning Outcomes Chapter 16 Describe the characteristics of the various sources of short-term credit, including Accruals trade credit bank loans

More information

CHAPTER 27. Short-Term Financial Planning. Chapter Synopsis

CHAPTER 27. Short-Term Financial Planning. Chapter Synopsis CHAPTER 27 Short-Term Financial Planning Chapter Synopsis 27.1 Forecasting Short-Term Financing Needs The first step in short-term financial planning is to forecast the company s future cash flows. This

More information

aggressive short-term financing policy amortization cash budget cash conversion cycle conservative short-term financing policy commercial paper

aggressive short-term financing policy amortization cash budget cash conversion cycle conservative short-term financing policy commercial paper aggressive short-term financing policy amortization cash budget cash conversion cycle commercial paper conservative short-term financing policy costly trade credit inventory blanket lien inventory conversion

More information

CHAPTER 17 Short-Term Financing

CHAPTER 17 Short-Term Financing 17-1 17-2 CHAPTER 17 Short-Term Financing Working capital financing policies Accounts payable (trade credit) Commercial paper Short-term bank loans Secured short-term credit Working Capital Financing Policies

More information

Chapter 019 Short-Term Finance and Planning

Chapter 019 Short-Term Finance and Planning Multiple Choice Questions 1. The length of time between the acquisition of inventory and the collection of cash from receivables is called the: a. operating cycle. b. inventory period. c. accounts receivable

More information

5.3.2015 г. OC = AAI + ACP

5.3.2015 г. OC = AAI + ACP D. Dimov Working capital (or short-term financial) management is the management of current assets and current liabilities: Current assets include inventory, accounts receivable, marketable securities,

More information

16A SECURED SHORT-TERM FINANCING ACCOUNTS R ECEIVABLE F INANCING. Procedure for Pledging Accounts Receivable

16A SECURED SHORT-TERM FINANCING ACCOUNTS R ECEIVABLE F INANCING. Procedure for Pledging Accounts Receivable App16A_SW_Brigham_778312 1/21/03 8:16 PM Page 16A-1 16A SECURED SHORT-TERM FINANCING This appendix discusses procedures for using accounts receivable and inventories as security for short-term loans. As

More information

So You Want to Borrow Money to Start a Business?

So You Want to Borrow Money to Start a Business? So You Want to Borrow Money to Start a Business? M any small business owners cannot understand why a lending institution would refuse to lend them money. Others have no trouble getting money, but they

More information

Chapter 22. Web Extension: Secured Short-Term Financing. Accounts Receivable Financing

Chapter 22. Web Extension: Secured Short-Term Financing. Accounts Receivable Financing Chapter 22 Web Extension: Secured Short-Term Financing T his extension discusses procedures for using accounts receivable and inventories as security for short-term loans. As noted earlier in the chapter,

More information

Inventory period: The length of time required to produce and sell the product.

Inventory period: The length of time required to produce and sell the product. FIN 301 Class Notes Chapter 19: Short-Term Financial Planning Operating Cycle Purchasing resources from suppliers Producing the product Distributing the product to customers Create cash flows: Unsynchronized:

More information

Web Extension 21A Secured Short-Term Financing

Web Extension 21A Secured Short-Term Financing Nikada/iStockphoto.com Web Extension 21A Secured Short-Term Financing This extension discusses procedures for using accounts receivable and inventories as security for short-term loans. As noted in the

More information

CHAPTER 16 Current Asset Management and Financing

CHAPTER 16 Current Asset Management and Financing Copyright 2008 by the Foundation of the American College of Healthcare Executives 6/13/07 Version 16-1 CHAPTER 16 Current Asset Management and Financing Investment and financing policies Cash and marketable

More information

Flashcards for Chapter 6 Introduction to Working Capital Management [ ]

Flashcards for Chapter 6 Introduction to Working Capital Management [ ] Flashcards for Chapter 6 Introduction to Working Capital Management [ ] [Type the abstract of the document here. The abstract is typically a short summary of the contents of the document. Type the abstract

More information

SOLUTIONS TO END-OF-CHAPTER PROBLEMS. Chapter 17

SOLUTIONS TO END-OF-CHAPTER PROBLEMS. Chapter 17 SOLUTIONS TO END-OF-CHAPTER PROBLEMS Chapter 17 3 360 17-1 Nominal cost of trade credit 97 30-15 0.0309 24 0.7423 74.23%. Effective cost of trade credit (1.0309) 24-1.0 1.0772 107.72%. 17-2 Effective cost

More information

Ipx!up!hfu!uif Dsfeju!zpv!Eftfswf

Ipx!up!hfu!uif Dsfeju!zpv!Eftfswf Ipx!up!hfu!uif Dsfeju!zpv!Eftfswf Credit is the lifeblood of South Louisiana business, especially for the smaller firm. It helps the small business owner get started, obtain equipment, build inventory,

More information

1. Define the operating and cash cycles. Why are they important?

1. Define the operating and cash cycles. Why are they important? Short-Term Planning Learning Objectives 1. Define the operating and cash cycles. Why are they important? 2. Define the different types of short-term financial policy 3. Understand the essentials of short-term

More information

CAPITULO 14 ADMINISTRACIÓN DE PASIVOS CIRCULANTES EJERCIOS Y PROBLEMAS DE REPASO

CAPITULO 14 ADMINISTRACIÓN DE PASIVOS CIRCULANTES EJERCIOS Y PROBLEMAS DE REPASO CAPITULO 14 ADMINISTRACIÓN DE PASIVOS CIRCULANTES EJERCIOS Y PROBLEMAS DE REPASO Ejercicios 1. As part of a union negotiation agreement, the United Clerical Workers Union conceded to be paid every two

More information

1. Planning - Establishing organizational goals and deciding how to accomplish them

1. Planning - Establishing organizational goals and deciding how to accomplish them 1 : Understanding the Management Process Basic Management Functions 1. Planning - Establishing organizational goals and deciding how to accomplish them SWOT analysis - The identification and evaluation

More information

9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle

9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle 9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle 9.1 Current Assets and 9.1.1 Cash A firm should maintain as little cash as possible, because cash is a nonproductive asset. It earns no

More information

THE ABC S OF BORROWING

THE ABC S OF BORROWING THE ABC S OF BORROWING All businesses, no matter what size, need to raise money at some time. Small business owners may be able to dip into their personal savings or borrow money from friends. More likely,

More information

UNDERSTANDING WHERE YOU STAND. A Simple Guide to Your Company s Financial Statements

UNDERSTANDING WHERE YOU STAND. A Simple Guide to Your Company s Financial Statements UNDERSTANDING WHERE YOU STAND A Simple Guide to Your Company s Financial Statements Contents INTRODUCTION One statement cannot diagnose your company s financial health. Put several statements together

More information

128 SU 3: Financial Accounting I

128 SU 3: Financial Accounting I 128 SU 3: Financial Accounting I 3.5 FINANCIAL ASSETS AND LIABILITIES Definitions 1. Financial assets include cash, equity instruments of other entities (e.g., preference shares), contract rights to receive

More information

ACCOUNT DEBIT CREDIT Accounts receivable 10,000 Sales 10,000 To record the sale of merchandise to Sophie Company

ACCOUNT DEBIT CREDIT Accounts receivable 10,000 Sales 10,000 To record the sale of merchandise to Sophie Company CURRENT RECEIVABLES Receivables are the amount owed to the organization by its customers and/or others. Current receivables will be collected within one year or the current operating cycle which ever is

More information

WHAT IS BUSINESS CREDIT?

WHAT IS BUSINESS CREDIT? 1 WHAT IS BUSINESS CREDIT? Why Do I Need Credit? Establishing a good credit rating is an important financial priority for every business. Having good business credit means that owners of businesses can

More information

READING 1. The Money Market. Timothy Q. Cook and Robert K. LaRoche

READING 1. The Money Market. Timothy Q. Cook and Robert K. LaRoche READING 1 The Money Market Timothy Q. Cook and Robert K. LaRoche The major purpose of financial markets is to transfer funds from lenders to borrowers. Financial market participants commonly distinguish

More information

Finding sources of capital. Secured and unsecured borrowing Selling equity Government programs Frequently overlooked sources

Finding sources of capital. Secured and unsecured borrowing Selling equity Government programs Frequently overlooked sources Finding sources of capital BusineSS Coach series Secured and unsecured borrowing Selling equity Government programs Frequently overlooked sources Business Coach series The fundamentals of finance The situation

More information

NOTE ON LOAN CAPITAL MARKETS

NOTE ON LOAN CAPITAL MARKETS The structure and use of loan products Most businesses use one or more loan products. A company may have a syndicated loan, backstop, line of credit, standby letter of credit, bridge loan, mortgage, or

More information

11/11/2013. Lecture 10 Debt capital. Prof. Maged Attia 11/11/2013. Idea or opportunity. Entrepreneur and team. Resources & Financing

11/11/2013. Lecture 10 Debt capital. Prof. Maged Attia 11/11/2013. Idea or opportunity. Entrepreneur and team. Resources & Financing Lecture 10 Debt capital Prof. Maged Attia 11/11/2013 1 2 Entrepreneur and team Idea or opportunity Lectures 1,5 Lectures 2, 3,4 Resources & Financing Lectures 6-10 Other topics: - Exit options - Family

More information

FINA351, Managerial Finance - Chapter 16 Notes WORKING CAPITAL. Involves current assets and liabilities in the operating cycle

FINA351, Managerial Finance - Chapter 16 Notes WORKING CAPITAL. Involves current assets and liabilities in the operating cycle FINA351, Managerial Finance - Chapter 16 Notes WORKING CAPITAL Involves current assets and liabilities in the operating cycle Is important for every business major to understand because: (1) it is where

More information

3. Seasonal or cyclical working capital to finance the temporary cash shortfalls due to the nature of the firm s normal business cycle.

3. Seasonal or cyclical working capital to finance the temporary cash shortfalls due to the nature of the firm s normal business cycle. 11.437 Financing Community Economic Development Class 5: Working Capital Financing I. Three different meanings of term working capital 1. Excess of current assets over current liabilities 2. Firm's investment

More information

Agriculture (Ag) Trade Finance. Agriculture / Commodity Trade Finance

Agriculture (Ag) Trade Finance. Agriculture / Commodity Trade Finance Agriculture (Ag) Trade Finance Agriculture / Commodity Trade Finance Table of Contents Select U.S. Ag Export Statistics Need For Ag Trade Finance Overview of Ag Trade Finance Solutions Ag Trade Finance

More information

Chapter 18 Working Capital Management

Chapter 18 Working Capital Management Chapter 18 Working Capital Management Slide Contents Learning Objectives Principles Used in This Chapter 1. Working Capital Management and the Risk- Return Tradeoff 2. Working Capital Policy 3. Operating

More information

Appraisal A written analysis prepared by a qualified appraiser and estimating the value of a property

Appraisal A written analysis prepared by a qualified appraiser and estimating the value of a property REAL ESTATE BASICS Affordability Analysis An analysis of a buyer s ability to afford the purchase of a home, reviews income, liabilities, and available funds, and considers the type of mortgage a buyer

More information

Medium-term or Intermediate Term Financing

Medium-term or Intermediate Term Financing Medium-term or Intermediate Term Financing Medium term finance [loan] is usually provided from three to ten years; Such finance is Obtained for meeting the cost of maintenance, repair, improvement and

More information

The Nature, Elements and Importance of Working Capital

The Nature, Elements and Importance of Working Capital C. WORKING CAPITAL MANAGEMENT 1. The nature, elements and importance of working capital 2. Management of inventories, accounts receivable, accounts payable and cash 3. Determining working capital needs

More information

The Corporate Finance Shift to Asset- Based Loans PART I

The Corporate Finance Shift to Asset- Based Loans PART I The Corporate Finance Shift to Asset- Based Loans PART I Realistic Business Owners Look Beyond Bank Cash Flow Loans 1 Brian Ballo Corporate Finance Associates The Good News 1 Financing is currently available

More information

It is concerned with decisions relating to current assets and current liabilities

It is concerned with decisions relating to current assets and current liabilities It is concerned with decisions relating to current assets and current liabilities Best Buy Co, NA s largest consumer electronics retailer, has performed extremely well over the past decade. Its stock sold

More information

Non-traded financial contracts

Non-traded financial contracts 11-1 Introduction Financial contracts are made between lenders and borrowers Non-traded financial contracts are tailor-made to fit the characteristics of the borrower In business financing, the differences

More information

CIMA F3 Course Notes. Chapter 3. Short term finance

CIMA F3 Course Notes. Chapter 3. Short term finance CIMA F3 Course Notes c Chapter 3 Short term finance Personal use only - not licensed for use on courses 31 1. Conservative, Aggressive and Matching strategies There are three over-riding approaches to

More information

Guide to Financial Statements Study Guide

Guide to Financial Statements Study Guide Guide to Financial Statements Study Guide Overview (Topic 1) Three major financial statements: The Income Statement The Balance Sheet The Cash Flow Statement Objectives: Explain the underlying equation

More information

Accounts Receivable and Inventory Financing

Accounts Receivable and Inventory Financing Accounts Receivable and Inventory Financing Glossary Accounts Payable - A current liability representing the amount owed by an individual or a business to a creditor for merchandise or services purchased

More information

CFA Exam Level I Corporate Finance Module Working Capital Management. Dr. C. Bulent Aybar. Professor of International Finance

CFA Exam Level I Corporate Finance Module Working Capital Management. Dr. C. Bulent Aybar. Professor of International Finance CFA Exam Level I Corporate Finance Module Working Capital Management Dr. C. Bulent Aybar Professor of International Finance Net Working Capital Working Capital includes a firm s current assets, which consist

More information

Short Term Loans and Lines of Credit

Short Term Loans and Lines of Credit Short Term Loans and Lines of Credit Disadvantaged Business Enterprise (DBE) Supportive Services Program The contents of this training course reflect the views of the author who is responsible for the

More information

Dealing With Your Banker &

Dealing With Your Banker & Dealing With Your Banker & Other Lenders Your financing The success or failure of your business will depend on whether or not you have enough capital to: buy the equipment and inventory you need; pay overhead

More information

Financing DESCOs A framework

Financing DESCOs A framework Financing DESCOs A framework A framework discussion about financing working capital for distributed energy services companies Chris Aidun and Dirk Muench March 2015 This paper looks at the growing need

More information

Apple Capital Group, Inc.

Apple Capital Group, Inc. COMMERCIAL FINANCE Commercial finance typical revolves around what are considered the assets of your business and are often called "asset based loans". The assets of your business are things such as your

More information

Chapter Review and Self-Test Problems

Chapter Review and Self-Test Problems 664 PART SEVEN Short-Term Financial Planning and Management Chapter Review and Self-Test Problems 19.1 The Operating and Cash Cycles Consider the following financial statement information for the Route

More information

Chapter 1 THE MONEY MARKET

Chapter 1 THE MONEY MARKET Page 1 The information in this chapter was last updated in 1993. Since the money market evolves very rapidly, recent developments may have superseded some of the content of this chapter. Chapter 1 THE

More information

Chapter 8 Financing a Business 1: Sources of Funds

Chapter 8 Financing a Business 1: Sources of Funds Financing a Business 1: Sources of Funds Solutions to Even-Numbered Problems and Cases 8.2 Coté Biologique Limitée (CBL) Data: Annual credit sales $10,000,000 Average collection period 50 days Industry

More information

v. Other things held constant, which of the following will cause an increase in working capital?

v. Other things held constant, which of the following will cause an increase in working capital? Net working capital i. Net working capital may be defined as current assets minus current liabilities. This also defines the current ratio. Motives for holding cash ii. Firms hold cash balances in order

More information

Guide to Sources of Financing for Companies

Guide to Sources of Financing for Companies Guide to Sources of Financing for Companies By John A. Leonard Director, Fairfield and Woods, P.C. Below is a short guide to sources of financing for companies. Twenty-two sources of financing are listed,

More information

Performance and Payment Bonds

Performance and Payment Bonds Performance and Payment Bonds Submission Requirements 1) Request for Performance and Payment Bonds. (Forms attached for your convenience, please return only with a Performance and or Payment Bond Request.

More information

Syndicated Revenue Loans. Secured Lines of Credit

Syndicated Revenue Loans. Secured Lines of Credit Syndicated Revenue Loans. Syndicated Revenue Loans are Revenue loans grouped together through a syndicate. Typically these loans are given while a revenue loan is still outstanding, but the business owner

More information

Borrowing Money for Your Business

Borrowing Money for Your Business Borrowing Money for Your Business After you have developed a cash flow analysis and determined when your business will make profit, you may decide you need additional funding. Borrowing money is one of

More information

Working Capital and the Financing Decision C H A P T E R S I X

Working Capital and the Financing Decision C H A P T E R S I X Working Capital and the Financing Decision C H A P T E R S I X Limited 2000 Figure 6-1a The nature of asset growth A. Stage I: Limited or no Growth PPT 6-1 Dollars Temporary current assets Capital assets

More information

Working capital: Keep the ball rolling

Working capital: Keep the ball rolling Working capital: Keep the ball rolling Author : Michael Byrne Date : March 9, 2011 Working capital is considered the life line of any company, allowing the company to grow, expand operations, and weather

More information

Topic Overview. Strategies and Management E4: Resources Management Sources of Financing

Topic Overview. Strategies and Management E4: Resources Management Sources of Financing Resources for the TEKLA curriculum at Junior Secondary Topic 7 Sources of Financing Strategies and Management Extension Learning Element Module E4 Resources Management Topic Level Duration Topic Overview

More information

Citigroup Global Transaction Services

Citigroup Global Transaction Services Citigroup Global Transaction Services Cash Management Trade Services and Finance Securities and Fund Services Uncovering the Hidden Value in Accounts Receivables Olivia Xu Director, NA Trade Sales Kate

More information

How to Assess Your Financial Planning and Loan Proposals By BizMove Management Training Institute

How to Assess Your Financial Planning and Loan Proposals By BizMove Management Training Institute How to Assess Your Financial Planning and Loan Proposals By BizMove Management Training Institute Other free books by BizMove that may interest you: Free starting a business books Free management skills

More information

Course 4: Managing Cash Flow

Course 4: Managing Cash Flow Excellence in Financial Management Course 4: Managing Cash Flow Prepared by: Matt H. Evans, CPA, CMA, CFM This course provides an introduction to cash flow management. This course is recommended for 2

More information

Use this section to learn more about business loans and specific financial products that might be right for your company.

Use this section to learn more about business loans and specific financial products that might be right for your company. Types of Financing Use this section to learn more about business loans and specific financial products that might be right for your company. Revolving Line Of Credit Revolving lines of credit are the most

More information

Overview of Financial Solutions

Overview of Financial Solutions Overview of Financial Solutions The Etra Advisory Group provides solutions to businesses for growth, expansion, cash flow, refinance and acquisition. We cover the world of business financing that banks

More information

Accounts Payable are the total amounts your business owes its suppliers for goods and services purchased.

Accounts Payable are the total amounts your business owes its suppliers for goods and services purchased. Accounts Payable are the total amounts your business owes its suppliers for goods and services purchased. Accounts Receivable are the total amounts customers owe your business for goods or services sold

More information

Module 1: Corporate Finance and the Role of Venture Capital Financing TABLE OF CONTENTS

Module 1: Corporate Finance and the Role of Venture Capital Financing TABLE OF CONTENTS 1.0 ALTERNATIVE SOURCES OF FINANCE Module 1: Corporate Finance and the Role of Venture Capital Financing Alternative Sources of Finance TABLE OF CONTENTS 1.1 Short-Term Debt (Short-Term Loans, Line of

More information

Accounts payable Money which you owe to an individual or business for goods or services that have been received but not yet paid for.

Accounts payable Money which you owe to an individual or business for goods or services that have been received but not yet paid for. A Account A record of a business transaction. A contract arrangement, written or unwritten, to purchase and take delivery with payment to be made later as arranged. Accounts payable Money which you owe

More information

Credit Management. Why Credit Exists

Credit Management. Why Credit Exists Credit Management (Text reference: Chapter 29) why credit exists terms of sale optimal credit policy credit analysis collection policy factoring AFM 271 - Credit Management Slide 1 Why Credit Exists clearly,

More information

6. It lengthened its payables period, thereby shortening its cash cycle.

6. It lengthened its payables period, thereby shortening its cash cycle. Answers to Concepts Review and Critical Thinking Questions 1. These are firms with relatively long inventory periods and/or relatively long receivables periods. Thus, such firms tend to keep inventory

More information

Movables Finance: Concepts, Key Elements, and Structuring

Movables Finance: Concepts, Key Elements, and Structuring Movables Finance: Concepts, Key Elements, and Structuring Jinchang Lai Principal Operations Officer, and Lead for Financial Infrastructure, Finance & Markets, World Bank Group Rabat, September 25, 2014

More information

Plan and Track Your Finances

Plan and Track Your Finances Plan and Track Your Finances 9.1 Financing Your Business 9.2 Pro Forma Financial Statements 9.3 Recordkeeping for Businesses Lesson 9.1 Financing Your Business Goals Estimate your startup costs and personal

More information

Export Transactions. Finance and Risk

Export Transactions. Finance and Risk Export Transactions Finance and Risk Table of Contents Export Finance Export Finance Methods Pre-Export Export Finance Methods Post-Export Structured Commodity Finance Export Risk Forms of Export Risk

More information

VUNTUT GWITCHIN FIRST NATION NOTES TO THE NON-CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2005

VUNTUT GWITCHIN FIRST NATION NOTES TO THE NON-CONSOLIDATED FINANCIAL STATEMENTS FOR THE YEAR ENDED MARCH 31, 2005 1. Basis of presentation These financial statements have been prepared on a nonconsolidated basis and do not include the accounts of the First Nation's compensation fund or Vuntut Development Corporation,

More information

It is concerned with decisions relating to current assets and current liabilities

It is concerned with decisions relating to current assets and current liabilities It is concerned with decisions relating to current assets and current liabilities Best Buy Co, NA s largest consumer electronics retailer, has performed extremely well over the past decade. Its stock sold

More information

Intermediate Accounting

Intermediate Accounting Intermediate Accounting Thomas H. Beechy Schulich School of Business, York University Joan E. D. Conrod Faculty of Management, Dalhousie University PowerPoint slides by: Bruce W. MacLean, Faculty of Management,

More information

Tejas Steel Supply, Inc.

Tejas Steel Supply, Inc. Tejas Steel Supply, Inc. James B. Bexley Sam Houston State University Joe F. James Sam Houston State University Abstract This case study is designed to explore the credit needs and worthiness of Tejas

More information

Are you in debt? Do you need to sell your house fast? Then Read on to find out How To Get Out Of Debt Now!

Are you in debt? Do you need to sell your house fast? Then Read on to find out How To Get Out Of Debt Now! Are you in debt? Do you need to sell your house fast? Then Read on to find out How To Get Out Of Debt Now! When you miss mortgage payments you can find yourself in deep trouble. The mortgage lender could

More information

Topic 4 Working Capital Management. 1. Concept of Working Capital 2. Measuring Working Capital and Net Working Capital. 4.

Topic 4 Working Capital Management. 1. Concept of Working Capital 2. Measuring Working Capital and Net Working Capital. 4. Topic 4 Working Capital Management 1. Concept of Working Capital 2. Measuring Working Capital and Net Working Capital 3. Optimization i i of Working Capital 4. Applications 80 Learning objectives This

More information

Quarterly Report. For the three month period ended. April 30, 2015

Quarterly Report. For the three month period ended. April 30, 2015 Quarterly Report For the three month period ended April 30, 2015 The attached unaudited interim condensed consolidated financial statements have been prepared by Management of International Datacasting

More information

Evaluate Performance: Balance Sheet

Evaluate Performance: Balance Sheet Excerpted from FastTrac GrowthVenture Financial statements and reports must be read together to learn the whole financial story. For example, an Income Statement may report a large sale to a new customer,

More information

Working Capital and Contract Caplines Program. Caplines 2.0: New and Improved

Working Capital and Contract Caplines Program. Caplines 2.0: New and Improved Working Capital and Contract Caplines Program Caplines 2.0: New and Improved Topics for Today s Discussion Structural Changes Key Features for Working Capital Caplines Key Features for Contract Caplines

More information

½ a mark for rounding up (6 marks) (b) There are a number of costs to the business associated with holding inventory:

½ a mark for rounding up (6 marks) (b) There are a number of costs to the business associated with holding inventory: EDI LCCI IQ ON DEMAND AWARD IN BUSINESS FINANCE AND BANKING OPERATIONS SAMPLE LEVEL 4 MARKING SCHEME DISTINCTION MARK 75% CREDIT MARK 60% PASS MARK 50% TOTAL 100 MARKS QUESTION 1 (a) Inventory days Receivable

More information

Financial Terms. File C3-05 March 2010 www.extension.iastate.edu/agdm

Financial Terms. File C3-05 March 2010 www.extension.iastate.edu/agdm Acceleration clause A common provision of a mortgage or note providing the lender with the right to demand that the entire outstanding balance be immediately due and payable in the event of default. Administrative

More information

Short Term Finance and Planning. Sources and Uses of Cash

Short Term Finance and Planning. Sources and Uses of Cash Short Term Finance and Planning (Text reference: Chapter 27) Topics sources and uses of cash operating cycle and cash cycle short term financial policy cash budgeting short term financial planning AFM

More information

C&I LOAN EVALUATION UNDERWRITING GUIDELINES. A Whitepaper

C&I LOAN EVALUATION UNDERWRITING GUIDELINES. A Whitepaper C&I LOAN EVALUATION & UNDERWRITING A Whitepaper C&I Lending Commercial and Industrial, or C&I Lending, has long been a cornerstone product for many successful banking institutions. Also known as working

More information

Preparing Financial Statements

Preparing Financial Statements Preparing Financial Statements Understanding financial statements is essential to the success of a small business. They can be used as a roadmap to steer you in the right direction and help you avoid costly

More information

Simply put, factoring is a transaction where a company sells its invoices at a discount in exchange for quick funds.

Simply put, factoring is a transaction where a company sells its invoices at a discount in exchange for quick funds. Imagine your growing business just made a six-figure sale to a company across the country. The problem? The buyer has 60 days to pay, but your cash flow is limited, meaning you can t afford the immediate

More information

Lending 101 The Basics

Lending 101 The Basics Lending 101 The Basics Overview Loan categories Credit types Different loan types Interest rate Applying for a loan Credit & credit reports Simple loan tips Test Loan Categories Secured loan - a loan that

More information

ASPE AT A GLANCE Section 3856 Financial Instruments

ASPE AT A GLANCE Section 3856 Financial Instruments ASPE AT A GLANCE Section 3856 Financial Instruments December 2014 Section 3856 Financial Instruments Effective Date Fiscal years beginning on or after January 1, 2011 1 SCOPE Applies to all financial instruments

More information

Introduction. Purpose. Student Introductions. Objectives (Continued) Objectives

Introduction. Purpose. Student Introductions. Objectives (Continued) Objectives Introduction Instructor and student introductions Module overview 1 2 Your name Student Introductions Your expectations, questions, and concerns about loans Purpose Loan to Own provides general information

More information

MONEY MARKET FUND GLOSSARY

MONEY MARKET FUND GLOSSARY MONEY MARKET FUND GLOSSARY 1-day SEC yield: The calculation is similar to the 7-day Yield, only covering a one day time frame. To calculate the 1-day yield, take the net interest income earned by the fund

More information

Athens University of Economics and Business

Athens University of Economics and Business Athens University of Economics and Business MSc in International Shipping, Finance and Management Corporate Finance George Leledakis An Overview of Corporate Financing Topics Covered Corporate Structure

More information

SCORER Counselors to America's Small Business. Structuring the Loan Request Types of SBA Loans Available How to Get the Banker to Say Yes

SCORER Counselors to America's Small Business. Structuring the Loan Request Types of SBA Loans Available How to Get the Banker to Say Yes SCORER Counselors to America's Small Business READY TO TALK TO THE BANKER Structuring the Loan Request Types of SBA Loans Available How to Get the Banker to Say Yes The Banker will expect you to provide

More information

Having cash on hand is costly since you either have to raise money initially (for example, by borrowing from a bank) or, if you retain cash out of

Having cash on hand is costly since you either have to raise money initially (for example, by borrowing from a bank) or, if you retain cash out of 1 Working capital refers to liquid funds used to purchase materials and pay workers. This is in contrast to long term capital such as buildings and machinery. Part of working capital management is cash

More information

Cash in bank checking account $22,500 U.S. treasury bills 5,000 Cash on hand 1,350 Undeposited customer checks 1,840 Total $30,690 Requirement 2

Cash in bank checking account $22,500 U.S. treasury bills 5,000 Cash on hand 1,350 Undeposited customer checks 1,840 Total $30,690 Requirement 2 Chapter 7 Solutions EXERCISES Exercise 7 2 Cash and cash equivalents includes: Cash in bank checking account $22,500 U.S. treasury bills 5,000 Cash on hand 1,350 Undeposited customer checks 1,840 Total

More information

PRESENTS. Top 5 Financing Options for Auto Repair Shop Owners

PRESENTS. Top 5 Financing Options for Auto Repair Shop Owners PRESENTS Top 5 Financing Options for Auto Repair Shop Owners TABLE OF CONTENTS Financing Options for Auto Repair Shop Owners 3 Unsecured Business Loans 4 Equipment Leasing & Financing 5 Business Line of

More information

AGENDA ITEM XI: CONSUMER CREDIT

AGENDA ITEM XI: CONSUMER CREDIT SCREENING CHAPTER 28 Country Session: LEGAL BASIS LAW NO. 4077 ON CONSUMER PROTECTION AMENDED BY LAW NO. 4822 (OG No: 25048, 14 March 2003) Came into force on 14 June 2003 BY-LAW ON RULES AND PROCEDURES

More information

Chapter 9 Bonds and Their Valuation ANSWERS TO SELECTED END-OF-CHAPTER QUESTIONS

Chapter 9 Bonds and Their Valuation ANSWERS TO SELECTED END-OF-CHAPTER QUESTIONS Chapter 9 Bonds and Their Valuation ANSWERS TO SELECTED END-OF-CHAPTER QUESTIONS 9-1 a. A bond is a promissory note issued by a business or a governmental unit. Treasury bonds, sometimes referred to as

More information

Business Financing. An Article by Michael L. Messer and Thomas L. Hofstetter SCHENCK, PRICE, SMITH & KING, LLP

Business Financing. An Article by Michael L. Messer and Thomas L. Hofstetter SCHENCK, PRICE, SMITH & KING, LLP Business Financing An Article by Michael L. Messer and Thomas L. Hofstetter SCHENCK, PRICE, SMITH & KING, LLP Even in these challenging economic times, businesses still have a need to grow and to obtain

More information

Copyright 2009 Pearson Education Canada

Copyright 2009 Pearson Education Canada The consequence of failing to adjust the discount rate for the risk implicit in projects is that the firm will accept high-risk projects, which usually have higher IRR due to their high-risk nature, and

More information

Jackson Masonry loan relationship: A case in commercial bank lending

Jackson Masonry loan relationship: A case in commercial bank lending Jackson Masonry loan relationship: A case in commercial bank lending Steve A. Nenninger Sam Houston State University James B. Bexley Sam Houston State University ABSTRACT This case describes a series of

More information